Cracks in Confidence: U.S. Bets on Biofuel Reform While EU Struggles with HVO Fraud

Today’s market showed signs of structural tightening as Jun/Sep and Jun/Dec ICE gasoil backwardations widened by +$12.50 and +$17.25/mt respectively up >30% on the day—despite bearish chart patterns and subdued sentiment. In the ARAG spot barge market, a sharp recalibration occurred: FAME 0°C is trading at $1,267/mt, while RME surged to a $68/mt premium. UCOME dropped to $1,375/mt, continuing its recent decline on lower activity.

In the U.S., the EPA has accelerated its proposed RVOs to the White House, even as the market remains focused on the anticipated “big and beautiful bill.” Contrary to expectations, D4 RINs fell to $1.05 today, reflecting market optimism that the upcoming legislation could expand credit supply and improve program clarity. Meanwhile, fundamentals remain heavy: NOPA crush jumped 12% YoY to 190.2 million bushels in April, but the crush was clearly meal-driven, as soybean oil stocks ballooned to 1.527 billion lbs—well above trade expectations. Paranaguá FOB Soyoil premiums collapsed to -470/mt for July, reflecting oversupply fears.

NOPA Soyoil stocks

Europe’s biodiesel market is still reeling from a certification scandal tied to a now-suspended UAE-based operator. Investigations revealed the company issued fraudulent sustainability certificates for hydrotreated vegetable oil (HVO), falsely claiming compliance with RED criteria. The scale is significant—up to 200,000 tonnes of suspect product may have entered the EU market. Crucially, under EU customs law, importers are legally liable for customs fraud—even if they acted in good faith—meaning this case could escalate into criminal or financial liability for EU-based buyers. The incident has severely undermined confidence in existing verification schemes and distorted the competitive landscape despite the fact that the ISCC traceability system worked to identify the issue and acted immediately to stop the fraud. Unwinding poses a significant issue because of the size of the fraud but is essential in order to restore confidence in the traceability system.

To address the crisis, the EU is rolling out the Union Database (UDB), with deadlines beginning in May 2025 and full traceability required by January 2026. However, the UDB is a centralized registry dependent on manual entries and oversight from the same voluntary schemes now under scrutiny. In response, ISCC and Nabisy have intensified their call for blockchain-based traceability, arguing that a decentralized system would provide immutable, real-time transparency that the UDB cannot guarantee. This scandal has given new urgency to the debate between bureaucratic control and digital trust.

As the U.S. charts its own path toward expanded mandates and credit reform, Europe faces a reputational and compliance reckoning. Restoring trust will take more than timelines and databases—it will require systems that cannot be gamed but at least provide a way to compensate victims of potential errors or fraud by perhaps introducing a fee-based system for certificates to accumulate a compensation fund. Whether through bold legislation in Washington or blockchain innovation in Brussels, the future of clean fuels now hinges on trust as much as carbon.